Property

A. Campbell Austin acaustin@law.upenn.edu Property I. A. B. C. D. E. F. G. H. I. Philosophical/Policy Perspectives ...................................................................................................... 2 Property is . . . ........................................................................................................................................................................ 2 Locke: Mixing labor with nature............................................................................................................................................ 2 Hegel/Rabin – Personhood & Fungible Property ................................................................................................................... 2 Rawls – veil of ignorance – Minimum Standards .................................................................................................................. 2 Utilitarianism – Maximize Aggregate Welfare ...................................................................................................................... 2 Transactions: Coase theorem (see Nuisance) ......................................................................................................................... 3 Entitlements: Calabresi & Melamed (see Nuisance) .............................................................................................................. 3 Discovery/Functionalism v. Formalism ................................................................................................................................. 3 Comments on Property Systems ............................................................................................................................................ 3 II. A. B. Possession ............................................................................................................................................. 4 Acquisition/Capture ............................................................................................................................................................... 4 Adverse Possession ................................................................................................................................................................ 4 III. A. B. C. Estates, Land and Future Interests ................................................................................................... 5 Four Present Possessory Interests .......................................................................................................................................... 5 Six Future Interests ................................................................................................................................................................ 6 Key to Interests ...................................................................................................................................................................... 6 IV. A. B. C. D. Concurrent Interests ........................................................................................................................... 6 Tenancy in Common - ―To X and Y‖ .................................................................................................................................... 6 Joint Tenancy - ―to X and Y in joint tenancy‖ ....................................................................................................................... 7 Tenancy by the Entirety (Marriage) ....................................................................................................................................... 7 Other systems: Corporations, Trusts & Partnerships .............................................................................................................. 8 V. A. B. C. D. E. Limitations on Use .............................................................................................................................. 8 Duties of Landowners to other parties ................................................................................................................................... 8 Nuisance - Externalities ......................................................................................................................................................... 8 Trespass ................................................................................................................................................................................. 9 Social Norms & Property Intistutions .................................................................................................................................. 10 Eminent Domain & Governmental Takings ......................................................................................................................... 11 VI. A. B. C. D. E. F. A. B. C. D. E. F. G. A. B. C. D. E. Real Estate Transactions ...................................................................................................................12 Process ................................................................................................................................................................................. 12 Issues ................................................................................................................................................................................... 12 Breach & Remedies ............................................................................................................................................................. 13 Recording Systems .............................................................................................................................................................. 13 Covenants ............................................................................................................................................................................ 15 Security Interests ................................................................................................................................................................. 15 Leasehold Interests .............................................................................................................................................................. 15 Tenant‘s Duties .................................................................................................................................................................... 15 Evictions .............................................................................................................................................................................. 16 Landlord‘s Duties ................................................................................................................................................................ 16 Meyer‘s Argument against Habitability (1975): Warranty of habitability is bad. ............................................................... 17 Rights Against Discrimination/Section 8 ............................................................................................................................. 17 Examples of Landlord-tenant court… .................................................................................................................................. 18 Generally – Arguments for and Against............................................................................................................................... 19 Who should be able to change things? ................................................................................................................................. 19 Easements ............................................................................................................................................................................ 19 Real Covenants - A contract attached to land....................................................................................................................... 21 Equitable Servitudes ............................................................................................................................................................ 22 VII. Landlord-Tenant Law .......................................................................................................................15 VIII. Servitudes, Easements & Non-Possessory Interests ........................................................................19 IX. A. B. C. Common Interest Communities ........................................................................................................23 Generally: Subset of Equitable Servitudes (e.g., Neponsit) .................................................................................................. 23 Creation & Judicial Oversight.............................................................................................................................................. 23 Models ................................................................................................................................................................................. 24 X. A. B. C. D. E. Zoning .................................................................................................................................................26 Euclidean Zoning - Constitutionality ................................................................................................................................... 26 Commentary ........................................................................................................................................................................ 27 Takings? .............................................................................................................................................................................. 28 Exclusionary Zoning ............................................................................................................................................................ 28 Growth Controls .................................................................................................................................................................. 29 XI. A. B. C. Takings ................................................................................................................................................29 Generally ............................................................................................................................................................................. 29 Exactions ............................................................................................................................................................................. 29 Regulations on Use .............................................................................................................................................................. 30 8/16/2009 Page 1 of 31 A. Campbell Austin acaustin@law.upenn.edu I. PHILOSOPHICAL/POLICY PERSPECTIVES A. Property is . . . 1. 2. 3. Property Law is rules to allocate to scarce resources Property rights are rules that structure relationships between people over things. Bundle of Rights a) Rights to: Use, Possess, Exclude, Transfer, Alter, Fruits b) Exclusion of one right doesn‘t mean you don‘t own the property. Anything you remove from state of nature Objective: SUPPORT PRODUCTIVE USE OF LAND. Problems: a) Anything you can‘t consume isn‘t your property b) Contracts can violate this – migrant workers picking tomatoes don‘t get to keep them. c) Now, there‘s no un-owned property. d) What about Shared rights? Your own body a) limits – no drug use b) no sale of organs Government‘s responsibility is to protect those property rights. What happens when use or property interferes with another‘s use of their property? Nuisance, etc. Things become part of us – familiarity leads to extension of self. Exercise of will is essential to individuality Community relationships with property, because individuals have relationships with groups (see Zoning, below) Some flaws: a) People don‘t really have to have property to be people b) Can interact with stuff that‘s not your own property What does this mean? Fungible v. Personal property a) Some property is essential to personhood – personal property (e.g., special stuff that can‘t be exchanged or compensated) b) Some property can be exchanged easily – fungible property (e.g., cash) E.g., eminent domain – more respect for personal homes Hide your actual potential, everybody would like the lowest common denominator to be good. Sort-of counter-argument: some people are risk-takers, and are ok with the possibility of Getting a crappy situation if they can have the opportunity of great success. Some people are satisfied with LCD, others are willing to take risk… in some cases, though, we socialize risk (e.g., insurance) Rough estimate – GNP Free market is best method for doing this – invisible hand USE LEGAL SYSTEM TO ADDRESS MARKET FAILURES. a) Externalities / Commons (well, open access) (1) Free goods will be exhausted (2) Nash equilibrium/prisoner‘s dilemma (3) Dis-alignment of personal and aggregate interest. (4) Fix with private property (a) E.g., oysters along atlantic seaboard (5) Or, fix with taxes or laws (or extrajudicial systems). (a) Have to handle pollution, when we can‘t sell shares of air… (b) Allocate right to enter Page 2 of 31 B. Locke: Mixing labor with nature 1. 2. 3. 4. 5. 6. C. Hegel/Rabin – Personhood & Fungible Property 1. 2. 3. 4. 5. 6. 1. 2. 3. D. Rawls – veil of ignorance – Minimum Standards E. Utilitarianism – Maximize Aggregate Welfare 1. 2. 3. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu (c) E.g., lobsters in maine b) Utility can‘t be measured purely in dollars… c) Tendency toward monopoly d) Individual myopia… e) Some problems with CLARITY OF INFORMATION!? f) Is this a descriptive or aspirational Other systems instead of Private Property as optimal system for maximizing efficiency? a) Basketball example of common (yet limited) resource (1) Who‘s got next? (a) Witnesses (b) Size of ―contestants‖. (c) Free throw contests (2) Winner stays (3) No authority for redress of grievances (4) But court isn‘t very nice… go to sports club? Transaction Costs and Least-Cost Avoider Who gets the entitlement? a) ―Entitlements should be awarded to the party that would have started bargaining for them in the absence of transaction costs.‖ (Economic efficiency – give the entitlement to the person who values it most (who can use it most efficiently for the market)) Builds off Utility: use legal system to enforce property rights and expedite transactions – efficient allocation of resources! a) Universality – property can be owned by anyone b) Exclusivity – property can be owned by just one someone (1) Limits – farmer might be limited by other‘s fair use of their property (2) Eminent domain c) Transferability – property can be transferred from one someone to another someone Problems this seeks to avoid: a) Cost of negotiation and litigation. b) Free-rider problem – people will wait for someone else to sue. c) Hold-out problem – people will negotiate company contribution up, claiming it‘s worth 20 or 25K, not 10 or 15. d) Opportunism – factory can extort more money than just cost of filter. Guiding principle: Least-Cost Avoider a) ―Least-cost avoider‖ – award burden to the party who can most cheaply solve the problem. (to force them to fix it) b) Or assign based on ―moral right‖ Property Entitlement – market transaction, specific performance, equity. Liability Entitlement – Court-determined Damages a) If lots of holdout/opportunism problems b) Or high TX costs. c) Reduction from property costs to keep essential factory open. Inalienability Entitlement – right can‘t be sold, transferred, etc. (no kidneys) Right by discovery—similar to Capture. Right by Conquest—Johnson v. M‘Intosh Instrumentalist v. Formalist—Pierson v. Post Neighborliness Principle – Shasta County - Ellickson Seniority and Shared commons – Lobstermen in Maine Bill of Rights to protect CIC residents – French (see Common Interest Communities) Land-use regs by Gov‘t – Ellickson, Epstein, etc. (see Zoning) a) Karkainnen – quasi-commons Page 3 of 31 4. F. Transactions: Coase theorem (see Nuisance) 1. 2. 3. 4. G. Entitlements: Calabresi & Melamed (see Nuisance) 1. 2. 3. 4. 1. 2. 3. 1. 2. 3. 4. H. Discovery/Functionalism v. Formalism I. Comments on Property Systems 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu b) Mandelker – externalities. Decline of private property – Sax (see Takings) Tragedy of the commons – Hardin 5. 6. II. POSSESSION A. Acquisition/Capture 1. Conquest: Johnson and Graham’s Lessee v. M’Intosh Statement of Policy (Utility) a) UNITED STATES has title over unowned Indian land. (1) Right of Eminent Domain (2) Compensation of Indians necessary. b) PRODUCTIVE USE: you have to use the land, otherwise you lose it. c) CLEAR TITLE: US has title, period. New rule—doesn‘t necessarily fit perfectly with past history. Capture: Pierson v. Post a) Occupancy b) Property interests in wild animals is acquired by occupancy only c) Rules v. Standards: (1) Rules – objective, efficient, but arbitrary, expensive to create. (2) Standards – more fair, cheap to create, but subjective, less efficient. Water interest - Riparian ownership: Evans v. Merriweather a) Policy issue: want to protect subsistence farming; parties should share common stream. b) Jury decides what reasonable use for individual farmers are. c) More important question: WHAT STANDARDS FOR ALLOCATION OF SCARCE RESOURCES? (1) What is the property? In this case, water is common. (2) What rights? Well, Water interest – Prior User: Coffin v. Left-Hand Ditch Co. a) Policy – efficiency. b) Want to avoid litigation, so court cleans up history – retroactively makes law of colo. Match current constitution. c) Encourages efficient use of property – first users get benefit. d) Also, don‘t want to admit that Coffin‘s rights have been changed; so Ct. says that he never had right to water. Rules: a) Actual possession (1) Consistent with normal use, according to characteristics of land. (a) Enclosures (b) Improvements (2) Constructive possession – POLICY (3) Color of title – claim based on defective document b) Hostile with a claim of right (1) Belief that property is YOURS. (a) Positive (b) Good faith (2) Can mean mistake (Mannillo)Jurisdictional Split: (a) Must be in bad faith – Maine Doctrine (b) Can mean honest mistake Mannillo v. Gorsky (steps) – follows Connecticut Doctrine (c) Becomes question of the action being ―contrary to the interest of the real owner‖ (3) Presumed or implied permission invalidates it. c) Open and notorious (1) Have to be give notice to public (2) Real owner has to have option for taking action against you)you. Page 4 of 31 2. 3. 4. B. Adverse Possession 1. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu d) Exclusive possession (1) Nobody else can be using the property e) Continuous for Statutory Period (1) Statutory Period (2) Tolling – disability of owner. (3) Tacking f) Other considerations: (1) Taxes (2) SEE EASEMENTS, COVENANTS and EQUITABLE SERVITUDES (a) Adverse P. requirements used for Easement by Prescription. E.g., Mannillo v. Gorski - apply test: a) Guy builds steps 15‖ onto another‘s property. b) Actual? Yes. c) Hostile? Well… (1) No intent (2) But it‘s contrary to the interest of the real owner. (adopts Connecticut doctrine here) d) Open & not.? Well… (1) Not really—it‘s only 15 inches. (2) e) Exclusive? Yes. f) Continuous? Yes. Can also look at Finley v. Botto (apartment buildings, path in between, under EASEMENTS) 2. 3. III. ESTATES, LAND AND FUTURE INTERESTS A. Four Present Possessory Interests 1. Fee simple absolute (longest) a) ―enfeffment‖ ceremony with clod of dirt. – origin of term ―FEE‖ b) all the ownership rights + infinite duration c) no qualifications d) use of ―fee simple‖ or ―fee simple absolute‖ Fee tail (long) a) duration is the life of the grantee b) ―heirs of grantee‘s body‖ c) three ways to deal with them (even one that‘s been grandfathered in): (1) ―A and the heirs of his body‖ (2) some states refuse this—fee simple absolute is substituted. (3) Some states say ―ok, whatever, but grantee can convert it to fee simple‖ (4) Some states allow only one generation. Defeasible fees (short) a) e.g., person gives you interest in property, but it‘s conditional. b) reverts back to grantor or his heirs. c) Two types: (1) FEE SIMLPLE DETERMINABLE: Explicit duration – ―possibility of reverter‖ held by grantor (repossession is automatic) (2) FEE SIMPLE SUBJECT TO A CONDITION SUBSEQUENT: Conditional duration – ―right of re-entry‖ held by grantor. (sometimes reentry is required for repossession with this) Life estate (shortest) a) for the duration of the grantee‘s life b) how is it created? c) What rights and obligations to grantee? (1) Statutorily defined (2) In some states, no changes allowed (3) LAW OF WASTE (a) sometimes not even allowed to improve the property (ameliorative waste) (b) permissive waste – can‘t just ―let it go‖ Page 5 of 31 2. 3. 4. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu (c) harmful waste. Term use a) landlord-tenant situation… see below. Possibility of Reverter a) After present possessory estate has expired, property reverts to grantor. Right of re-entry or power of termination a) After conditional present possessory estate, grantor retains right of re-entry. Reversion a) After expiration of life estate, property reverts to grantor. Contingent remainder a) Pending condition, when property doesn‘t revert to grantor. b) Also if the grantee is unknown Vested interest a) Certain b) Can be vested, subject to open (remember ―fertile octogenarian‖), divestment, or defeasement c) When there‘s no condition on the remainder, it‘s a vested interest. Executory interest a) Future interest given when grantee gets everything remaining (e.g., remainder of infinite duration after a life estate) b) Pending condition—term use, life use, defeasablility, etc. no future interests Reversion to Grantor 5. B. Six Future Interests 1. 2. 3. 4. 5. 6. C. Key to Interests Fee Simple Absolute Fee Tail (archaic) Fee Simple Defeasable: FS Determinable (automatic)  (duration: “so long as”, “while”, “until”) FSSubj. to Executory Limitation (automatic) (same as cond. subs.) Possibility of Reverter (to grantor) Executory Interest (to 3rd party) Shifting Springing (after one grantee, then back to grantor, then to another grantee) Right of Entry/ Power of Termination FSSubj. To Cond. Subseq. (grantor act)  Express Reservation Conditional (“but if”, “on condition that”, “provided, however”) Life Estate Reversion  (to grantor) Shifting Executory Interest  (to 3rd party) Remainder  (to 3rd party) Contingent (condition precedent) Vested Indefeasably Subject to Open Subject to Defeasance (condition subseq.) Partial Complete IV. CONCURRENT INTERESTS A. Tenancy in Common - “To X and Y” 1. 2. 3. 4. Each party owns a percentage, but percentages add up to 100% No reimbursement necessary for use of allotted percentage (regardless of where it is) Still limits on what each party can do. Rights and Obligations: a) Partition – (1) in kind – split the land (preferred) E.g., Delfino v. Vealencis (dump-owner v. developer tenant in common) (2) by sale – sell the land, split the proceeds Page 6 of 31 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu (3) by appraisal – permit one tenant to buy out others b) Possession (1) All tenants have right of possession of 100% (2) But tenants‘ interests all add up to 100%. (3) ―OUSTER‖ when one tenant is prohibited from using the property. (a) (in which case, ousted tenant gets rent from tenant in possession) c) Contribution (1) Tenant can demand taxes, mortgages, insurance, repairs, etc. from other tenants. (at accounting or at partition) (2) Repairs – cost of repair. d) Fiduciary Obligations (1) Higher standard of care with regard to co-tenants (2) Confidential relationships create fiduciary obligation: any co-tenant who gets a lien is deemed to have acquired it on behalf of all the co-tenants. (3) Inherited Title: co-tenants who acquire their interests by will are regarded as fiduciaries. e) Accounting (1) Bring suit anytime, but can also wait until partition. (2) Rents – assumes one party is doing management, provides for other parties to monitor that management (3) Depletion – waste, allowed for fractional depletion of resources. AP Article - Developers and Lawyers Use a Legal Maneuver to Strip Black Families of Land (100s of joint tenants, developer buys a couple, forces partition by sale): Each party owns 100% - as if they are each sole owners Concurrent interest – parties are considered one person. a) E.g., Swartzbaugh v. Sampson (husband sub-leases to boxing outfit) – one joint tenant can‘t sue other, and can‘t prevent one tenant from using all of the property. b) Flaws – courts prefer tenancy in common. RIGHT OF SUVIVORSHIP– last living tenant keeps everything (common among married types or families) Some requirements: ―four unities‖ a) Same time b) Same title c) Same interest d) Same possession e) Now, not so much in effect—courts are more and more willing to interpret what used to be set in stone. Pretty much able to be broken by one party, though, by conversion into tenancy in common through straw man. a) E.g., People v. Nogarr (husband mortgages his share to parents, dies) (1) POLICY: Encourage people to enforce their claims quickly. (2) POLICY: Encourage creditors to contract with both joint tenants of a given property. (a) Creditor only gets part interest. Right of survivorship means that creditor only Additional constraints Don‘t have ―four unities‖ anymore, but… a) need marriage b) survivorship sticks c) can‘t use property without consent of both parties Community law – anything coming in (e.g., paychecks) are community property, nothing is individual a) also protects community property from suits against individual liability ―to X and Y by the entirety‖ – has to be said explicitly! 5. B. Joint Tenancy - “to X and Y in joint tenancy” 1. 2. 3. 4. 5. C. Tenancy by the Entirety (Marriage) 1. 2. 3. 4. 8/16/2009 Page 7 of 31 A. Campbell Austin acaustin@law.upenn.edu 5. Statutory Rule of Community Property a) Based on Civil Law b) Division of property is still pretty specific Effect of Mortgage on Joint Tenancy Title Theory State Interest held by Legal title lender Interest held by Equity of Redemption joint tenant Effect Unity of interest destroyed; joint tenancy severed; lender gets ½ (or whatever) interest in property as tenant in common. 6. Lien Theory State Security interest Legal Title 7. Joint tenancy survives; lender gets nothing. People v. Nogarr – non-mortgaged tenant gets windfall if mortgaged tenant dies. Of course, if lender forecloses, then joint tenancy must be split, and lender gets tenancy in common. (there might be a right of redemption here, though.) Main questions at divorce are ―what is property‖? a) Professional Degrees are not property: E.g., In re the Marriage of Graham 455 N.W.2d 303 (Iowa App 1989) p.241 (MBA degree is not property) (1) Doesn‘t conform with traditional property concepts (2) No market value; can‘t be transferred, etc. b) Medical License is property: E.g., O’Brien v. O’Brien 66 NY2d 576 (1985) p.246 (medical practice & loans are property) (1) Present value of medical license (2) Statute holds that all property acquired by either or both spouses during the marriage and before the execution of a separation agreement … regardless of the form in which title is held.‖ (3) Economic partnership – marital property – each partner makes a contribution, and is entitled to that contribution and appreciation thereof (4) Pre-nups are means of contracting around the rule. (5) The court is also locking in the decision to practice medicine by valuing the degree; (6) Can declare them loans that should be paid back with interest (Calif.) D. Other systems: Corporations, Trusts & Partnerships V. LIMITATIONS ON USE A. Duties of Landowners to other parties 1. 2. 3. 4. 5. 1. Undiscovered trespassers: No Duty of Care Licensees (guests): Duty to inform of hidden hazards, don‘t have to inspect Invitees (Business guests/Customers): Duty to keep place safe, inform of hazards, inspect. Many jurisdictions have thrown out these distinctions, now: reasonableness. Businesses (public accommodations) can‘t discriminate on race, religion, etc. Coase Theorem a) New Idea: Bargaining over externalities – factory v. residents (1) Costless bargaining corrects externalities, always. (a) Residents/Factory could install home AC (150K) (b) Residents/Factory could pay to install filter (100K) (c) Residents/Factory could move. (500K) (2) Doesn‘t matter who wins the court case; most socially efficient result will happen. (3) Of course, the court decision will force the burden/cost onto the losing party. b) But there are transaction costs— (1) Negotiation and litigation (2) Free-rider problem – people will wait for someone else to sue. B. Nuisance - Externalities 8/16/2009 Page 8 of 31 A. Campbell Austin acaustin@law.upenn.edu (3) Hold-out problem – people will negotiate company contribution up, claiming it‘s worth 20 or 25K, not 10 or 15. (4) Opportunism – factory can extort more money than just cost of filter. c) Conclusion: ―entitlements should be awarded to the party that would have started bargaining for them in the absence of transaction costs.‖ Calabresi & Melamed a) Other conclusion: ―least-cost avoider‖ – award entitlement to force the party who can most cheaply solve the problem. b) 3 TYPES OF ENTITLEMENTS: Property – Market Liability – Court-set Inalienability – transaction (Contracts) damages. (Torts) right can‘t be sold. Encroacher If factory wins, Court-defined damages Nuke plants – (factory) residents have to buy to factory allowed to pollute out owner. (e.g., always. Waschak v. Moffat) (Herculaneum) Property If property owner wins, Damages to residents. (no kidney sales!) Owner then factory has to pay (e.g., Boomer v. (residents) residents. Atlantic Cement) c) Property Rules: Cost should be allocated to put cost on side best able to deal with problem: e.g., Waschak v. Moffat 379 Pa. 441 (1954) p.299 (coal banks) (1) Social norms hold coal banks are reasonable and natural use of land. (2) Well, sort of… dissent says it‘s pretty unreasonable, and possibly downright hazardous. d) Liability Rules: e.g., Boomer v. Atlantic Cement 26 NY2d 219 (1970) p.311 (temporary v permanent damages from plant) (1) Law says: ―if nuisance, then injunction.‖ (2) Economic considerations of shutting down the plant win. (3) Court concludes that permanent damages (NPV) is the appropriate award. (4) But this is a crappy incentive, as noted in dissent – we‘re allowing them to continue committing the wrong. Successive actions, despite being a pain in the neck, are better at this. e) Inalienability Rules: e.g., Herculaneum, MO – Lead-tainted town (1) Example of liability (kind of), (2) Might also fit with property (because company is buying out some homeowners) (3) To certain extent, right of company to exist is inalienable—protected despite pollution. (4) Ultimately, though, we don‘t know who has the right here—there‘s no case in Missouri saying ―factories can‘t spew lead‖ or the opposite… (a) Because nobody wants to sue the company. (b) And, company is crucial to survival of the town (5) Now, rule established – property right, has to buy out residents. (a) Kids? (6) No set price… when purchased? Classic Case: e.g., Pile v. Pedrick 167 Pa. 296 (1895) p.288 (wall 1½‖ over property line, forced to tear it down) a) Clear standard b) Property rule – buy out other party. c) Cost issue: (1) Chipping wall off (2) New wall (3) Buy out plaintiff Reasonableness Standard: e.g., Geragosian v. Union Realty 289 Mass. 104 (1935) p.289 (theater fire escape & sewer line encroaching, court says just fix it) a) New drain would cost $4,300; property only worth $2,800 2. C. Trespass 1. 2. 8/16/2009 Page 9 of 31 A. Campbell Austin acaustin@law.upenn.edu b) Despite the fact that the owner suffers little or no damage to trespassee, injunction still holds. c) Couple of exceptions to injunction: (1) Laches (delay) (2) Estoppel (prior promise to accept trespass) (3) Hardship (4) ―Unclean hands‖ – taking advantage of Vartigian‘s knowledge of trespass. d) Rabin‘s Personhood interest applies, sort of. But there hasn‘t been a whole lot of personal investment here… Good Faith Improver; e.g., Rabb v. Casper 51 Cal. App 3d 866 (1975) p.292 (shack & house on California property, warning issued midway through construction) a) Casper relies on ―good-faith improver‖ statute: requires people to buy out trespassee when improvements are made in good faith. (1) Protect against unjust enrichment – landowner could say ―I want the new house!‖ (2) Waste & inefficiency… poor utility to require people to tear down houses… (3) Adverse possession arguments… (4) …except that we also need to protect rights of property owners, otherwise people won‘t buy property… slippery slope. b) T.Ct. finds for D, but doesn‘t take negligence into account (negligence in not stopping construction after warning, not surveying to begin with). c) App.Ct. remands – T Ct should consider warning as negligence – can‘t surprise with objection midway through. Sublegal social systems serve to adjudicate more often than law: Ellickson: Shasta County Case Study a) Cattle farming on plains, winter cattle on mountains in rural county b) Foothill population growth c) Different trespass rules: (1) Open range (a) No liability except for ―goats, swine & vicious dogs‖ (b) Liability in fenced areas (2) Closed range (a) Common Law: owners of animals are strictly liable (3) Patchwork of closed & open range areas, as dictated by ordinance. d) Social Norms control (1) Laymen: One group ―has the rights‖ (a) Cattlemen in open range (b) Property owners in closed range (2) Legal experts: (a) Lawyers/etc. - Focus on negligence (b) Insurance adjusters (c) 2 county officials know: (i) Animal control officer (ii) Brand inspector (3) Neighborliness dominates (a) Lawsuit as last resort (b) Coase: people first find out legal entitlement (c) Reality… people are ―outside the shadow of the law‖ – social norms dominate… (d) So, is law really that important? (e) Well, all of this assumes the same interest – neighborliness. e) Informs ‗alternative dispute resolution‘ – neighborliness is better system in homogenous society… (1) Protect property owners… well, which property? f) Law is one-shot deal; Neighborliness is long-term engagement. (Game Theory) 3. D. Social Norms & Property Intistutions 1. 8/16/2009 Page 10 of 31 A. Campbell Austin acaustin@law.upenn.edu 2. Neighborliness: Schild v. Rubin 232 Cal.App.3d 755 (1991) p.474 (neighbor sues for basketball playing) a) Schild‘s kid plays basketball; neighbor Rubin complained. Schild installs ―noise abatement tech‖ b) Rubin sprayed them with water. c) Schild sues. Rubin counter-sues. d) Rubin brings in experts: (1) Accoustical engineers monitor noise levels – finds Noise level exceeds LA noise standards. (2) Appraiser says 15% reduction in value. e) T.Ct. says basketball only at certain times. f) App. Ct. throws it out, claiming that there‘s no evidence of emotional distress g) Courts are pissed that case is there—―you have by your conduct and by your position as lawyers embarrassed the Bar and the judicial system as a whole‖ Limitations on rights of property owners a) Limits on Right to Exclude Gov‘t workers: State v. Shack 58 NJ 297 (1971) p.372 (migrant farm worker aid barred illegally) (1) Facts: (a) D attempted to provide gov‘t-backed legal and health aid to migrant workers on P‘s land (b) P calls state trooper, charges trespass (c) P wins in T Ct and App Ct, D wins in Sup. Ct. (2) SCNJ says right to exclude doesn‘t include right to exclude gov‘t workers in pursuance of their offices. (a) Migrant farmers are employees housed on P‘s land (b) Title to real property cannot include dominion over the destiny of guests. (c) Law will deny the occupants the power to contract away what is deemed essential to their health, welfare or dignity. (d) But, there‘s a way to protect their rights without infringing on the property right of the owner. (e) And, to a certain extent, this is an unlawful search—no warrant. (3) You can now get access to someone else‘s property when you‘re providing a gov‘t service, essential to health, welfare, or dignity, to disadvantaged third parties that they cannot receive any other way. b) Quasi-public space: PruneYard Shopping Ctr. v. Robins 447 US 74 (1980) p.377 (HS students passing out fliers in privately-owned shopping area) (1) Facts: (a) HS students distributing pamphlets (b) Shopping ctr has rules against such activity. (2) SCOTUS says it‘s ok— (a) Shopping center offers public invitation (different from private houses, etc.) (b) Speech in shopping centers allowed by state law (c) 14th Amendment – due process… (i) Can scare off shoppers (ii) This is not really a taking… (iii) But there are restrictions: (a) Can‘t force some people to bear burden better borne by public as a whole. (b) Must be done in orderly manner. Right of the sovereign, comes from English law. 5th Amendment protects. a) ―Nor shall private property be taken for public use without just compensation.‖ b) Fair Market Value c) What is Public use? 3. E. Eminent Domain & Governmental Takings 1. 2. 8/16/2009 Page 11 of 31 A. Campbell Austin acaustin@law.upenn.edu 3. Stretching Eminent Domain: Redistribution of land as public use: Hawaii Housing Authority v. Midkiff 467 US 229 (1984) xerox (18 landowners own 40% of land in Hawaii, HHA condemns property, takes it, and resells it to lessees) a) Landowners claimed that this isn‘t public use. b) SCOTUS says: ―eminent domain power is rationally related to a conceivable public purpose, the Court has never held a compensated taking to be proscribed by the Public Use Clause.‖ So it‘s ok according to the Ct. Stretching Eminent Domain: Job creation as public use: Poletown Neighborhood Council v. City of Detroit (City takes 1000 structures, 450 acres, and gives it to GM for plant) handout (304 NW2d 455) a) Public purpose (saving jobs) makes this ok under the Public Use clause. b) Dissent says that‘s crap—gov‘t is taking people‘s property Current Standards: a) Public use is whatever gov‘t says it is… (current standard) b) Don‘t want to force private individuals to bear costs that should be borne by the entire public. Possible Standards: a) ―Actually used by the public‖ (1) who is ‗the public‘? (2) what is use? (profit?) b) ―Benefits public‖ (1) what‘s a ‗benefit‘ c) ―Can‘t be owned privately, must be owned publicly‖ (1) but everyone doesn‘t agree on what they want (2) and private ownership may benefit the public (e.g., charter schools, etc.) d) ―No commercial purposes‖ (1) consistency? (2) Discouraging profit isn‘t really a good thing… e) ―Hierarchy of needs‖ (1) housing, farming, etc… f) Free Markets? (1) But is the market really broken? (Personhood/Holdouts/etc.) 4. 5. 6. VI. REAL ESTATE TRANSACTIONS A. Process 1. 2. 3. 4. 1. Contract Escrow period – recording acts Closing – delivery of deed; Record deed immediately! (Foreclosure of Security Interests) Caveat Emptor a) Generally, Buyer has burden of finding problems/issues. b) Exceptions: (1) Covenants of Title (2) Warranty of Fitness (new houses only) (3) Suit for misrepresentation (4) Suit for Fraud Statute of Frauds for Land Transactions (Rest Contr. §110) a) Specific requirements b) Must be in writing (Rest Contr. 2d §131) (1) Identify the parties (2) Describe the land (3) State the price (4) State other essential terms c) Rest. Contr. 2d §129 – reliance on promise is exception to this—specific performance may be required. Page 12 of 31 B. Issues 2. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu 3. Equitable Estoppel – when one party detrimentally relies on the oral contract, the court may enforce specific performance – based in Fraud. a) there was a false representation or concealment of material facts, b) the representation must have been known to be false by the party making it, or the party must have been negligent in not knowing its falsity, c) it was believed to be true by the person to whom it was made, d) the party making the representation must have intended that it be acted on, or the person acting on it must have been justified in assuming this intent, and e) the party asserting estoppel acted on the representation in a way that will result in substantial prejudice unless the claim of estoppel succeeds. Recission and restitution Damages Specific performance Measure of damages: a) Benefit of the bargain b) Incidental damages c) Consequential damages Damages in Reliance: Younge v. Huysmans 127 NH 461 (1985) p.396 (estate sale, withdrawn, = breach) a) Facts (1) H offers to purchase for $160K, provides deposit of 10K (8/10) (2) Bank and H conclude price of 172K (8/21) (3) Bank sends confirmation letter (8/31) (4) H records letter at city hall (9/8) (5) H sells their house (9/8) (6) Bank sends letter (End of Oct.) (7) H notes problems with letter (10/29) (8) Bank finds record of letter,wants it released (11/1) (9) Bank says ―deal‘s off‖ (11/18) (10) H gives unwitnessed release to Bank (4/8) (11) Bank sells land to C (9/1) (12) C makes improvements (13) Bank and C file to QUIET TITLE (10/1) (14) H files for specific performance (12/27) b) Court says: (1) It‘s a contract (2) Damages (a) $1.2K in specific damages (b) $15K in aggravation and harassment c) When do we have a contract? (1) Do you need a writing? (2) Lay understanding: lots of paperwork assumed! (3) Lots of consideration here, though: (a) 10K check, H sells house (b) Bank took house off market (4) Bank seems dishonest (―short note to confirm that we have accepted your offer‖) (5) Bank should take property off the market in exchange for deposit, at lest… but this is custom, not law. Indexes: a) Tract System – indexed by property b) Grantor-Grantee System – indexed by last name Recording laws: a) Race Statutes: 1st person to record wins, even if he’s the 2nd purchaser. C. Breach & Remedies 1. 2. 3. 4. 5. D. Recording Systems 1. 2. 8/16/2009 Page 13 of 31 A. Campbell Austin acaustin@law.upenn.edu (1) Rule – clear. (2) But… assumes perfect knowledge of the law. (3) Also, if there‘s notice and a 2nd purchase, then 2nd purchase can still win… b) Notice: 1st person to give notice wins. if 2nd purchaser didn’t have notice, then he wins (1) Standard—somewhat unclear (2) Actual v. constructive notice? c) Race-Notice: 1st person to file or give notice (1) Balances needs of 2nd purchaser (2) So if there‘s no notice, then 1st to file wins. Problem areas, e.g., Philadelphia‘s recording system a) 8-10 month delays. b) Stamped on submission date, but sits for awhile. c) Causes problems for (1) Race statutes (a) Law relies on recording and on dates. (b) Clouds title – don‘t know if you win until much later! (c) Can slow real estate xactions, if we have to wait for clear recorded title. (d) Can discourage improvements. (2) Notice statutes— (a) No problem if true owner occupies it (b) standard doesn‘t rely completely on recording system. (c) Recording system can be notice, though, so if there‘s nothing recorded, then 2nd purchaser can claim no notice & get title. (3) Race-notice: (a) PA law. d) Possible solution: (1) Private informal filing systems e) NY doesn‘t have this problem (1) NY has bigger market (2) More interests in NY market (3) NY has more money to support recorder of deeds office (4) NY has tradition of better gov‘t; deeds office isn‘t political. Other problem areas: Phila. Housing Scam a) Look for abandoned property b) Forge a deed c) Have deed transferred to him d) Sell it to another party e) Issues (1) Anyone can get a deed at the recorder‘s office (2) Anyone can file a deed (3) Deeds aren‘t scrutinized f) Couple of possible solutions: (1) Improve professionalism of public sector (2) Improve notary system (3) Cut political influence—reduce corruption. Constructive Notice: e.g., Miller v. Green 264 Wis 159 (1953) p.412 (farm sale to lessee, 2 nd sale to other guy, lessee wins because he took possession) a) Facts (1) Green owns farm (2) Miller leases it (3) Miller buys it & continues farming land (4) Hines buys it from Green (5) Miller sues (6) T Ct says no notice of Miller‘s purchase, so Hines wins. b) Court says Page 14 of 31 3. 4. 5. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu Race-Notice statute – 1st filing or 1st notice. Court says Possession = notice Miller gets it—he possessed the land. 2nd buyer should check out the land; if he had, he would have found Miller possessing it. (5) So tough nuts. (1) (2) (3) (4) E. Covenants 1. Present Covenants a) Sesin – promise that grantor has title b) Right to convey – promise that grantor has right to transfer c) Freedom from encumbrances Future Covenants a) Warranty b) Quiet enjoyment c) Further assurances Types of deeds: a) General Warranty – contains all covenants of title b) Special warranty – protect grantee from certain acts by grantor c) Quitclaim – no promises Types of Interests a) Mortgage – lien on the property; majority consider this transfer of title. b) Deed of Trust – borrower conveys title to trustee, who holds the property in trust for the benfit of the lender. Foreclosure a) Lender may foreclose if (1) Debtor is unwilling to pay (2) Debtor fails to insure, or pay taxes (3) Debtor fails to maintain the property b) Types (1) Judicial Foreclosure – lender files suit (a) Borrower usually has Right of Redemption (2) Power of Sale Foreclosure – lender may hold public sale of property almost immediately. c) Right of Redemption Statutes (1) Statute (2) Borrower (or his heirs/assigns) may redeem the property for a specified period after the sale (3) Normally, borrower remains in possession during the redemption period (defined by statute) Deficiency Judgment – when foreclosure sale proceeds don‘t meet the debt. a) Lender may seek deficiency judgment against borrower b) Anti-Deficiency Statutes – some states prevent deficiency judgments. (Depression-era) (1) Mortgagors can‘t waive these protections. (2) Critics – say that these statutes increase the cost of mortgages, because it makes lenders insurers of charge-offs. 2. 3. F. Security Interests 1. 2. 3. VII. LANDLORD-TENANT LAW A. Leasehold Interests 1. 2. 3. 4. 5. Term of years – set term, possibly fraction of a year Periodic tenancy – set period, continuing automatically Tenancy at will – as determined by contract Tenancy at sufferance – penalty, e.g., tenant stayed past contracted period, etc. Leases can be contract or an estate/property interest. B. Tenant’s Duties 8/16/2009 Page 15 of 31 A. Campbell Austin acaustin@law.upenn.edu 1. 2. 3. 1. 2. Pay rent Not maintain a nuisance Duty to vacate at the end of the term Forcible entry and forcible detainer – landlords may not use self-help Unlawful detainer a) notice b) bring suit c) upon tenant‘s loss of suit, sheriff will evict Detainer statutes can exclude damage claims & counter-claims Specialized landlord-tenant court: a) efficiency (regular system = 2 years to adjudication) b) specialization c) more substantial justice – judges with experience. d) Court may be more sensitive to tenants Landlords are repeat-customers, so they get benefit too. Duty to Mitigate a) Have to show apartment as ―one of vacant stock‖ (unclear meaning, though) Sommer v. Kridel (guy opts out of lease, landlord holds property vacant for another year, Sup. Ct. changes rule, reverses—enough evidence to say there was no mitigation. b) Landlord has duty to prove mitigation: Riverview v. Perosio (guy rents for a year of 2year lease, breaches at end of 1st year, court requires evidence of mitigation.) c) Reletting on tenant‘s account – if the new tenant‘s rent doesn‘t equal the old tenant‘s rent, the old tenant has to pay the difference. Implied covenant to deliver possession a) US Rule: Legal Possession: Getting rid of trespassers is tenant‘s duty b) English Rule: Actual Possession: Landlord has to get rid of tenants Implied covenant of quiet enjoyment a) Landlord, someone with paramount title, etc., can‘t disrupt tenant‘s possession. b) Doesn‘t include other people. . . should landlord be required to provide quiet atmosphere for tenant? Other tenants, neighbors, etc., can cause problems, and landlord isn‘t responsible. . . c) Nuisances? EXAM QUESTION – USE CALABRESI & MELAMED TO DEFINE WHO HAS DUTY OVER NUISANCE. d) Actual Eviction e) Constructive Eviction Warranty of Habitability a) Development: (1) Traditional idea—landlord just leases the land; buildings are incidental (medieval farmers, etc.) (2) Late 19th century idea—landlord has duty to keep premises habitable. b) Now, landlord has to maintain property fit for tenant’s use – inalienable interest. (1) Tenant still has to show property was unsuitable (based on housing codes) (2) Tenant has to report them/give notice (3) Allow time for repair c) While we‘ve had codes for a century, they‘re still failures . . . (1) Incentive structures . . . (a) Penalties are pretty small. (b) Prosecutions are rare. (c) Judges don‘t do fines (2) Housing depts. are underfunded & understaffed (a) Capture by landlords C. Evictions 3. 4. 5. 1. D. Landlord’s Duties 2. 3. 4. 8/16/2009 Page 16 of 31 A. Campbell Austin acaustin@law.upenn.edu d) Tenant doesn‘t have duty to repair, but have to pay after witholding: Javins v. First National Realty Corp. (tenants withhold rent because of new violations of housing code) p.634 (428 F.2d 1071; 1970) (1) Tenant-side arguments: (a) Tenants can‘t fix stuff (plus, no money to do it.) (b) Tenants aren‘t allowed to fix heat, water, etc., plus, apt. buildings are complicated (c) Leases for limited term – no incentive to improve (d) Monthly rent is fixed, creates responsibility (e) Unfair bargaining power, particularly in tight market (2) Landlord-side arguments: (a) No-waste; landlords should maintain their property, regardless of whether they have tenants. (b) Landlords are in best position to fix stuff (3) Housing Codes – Society-side arguments: (a) Housing codes are the standard of ―fitness‖ (b) Housing codes are implied in all leases. e) Remedies: (1) Rent application – tenant can “repair and deduct” (a) Problems: tenant might not have enough resources to fix. (b) Disincentive for landlord to fix . . . maybe. Tho, tenant might go out and get really expensive solution. (c) Tenant doesn‘t know what he‘s allowed to repair. (2) Rent withholding – tenant can withhold rent until the landlord fixes the problem. (a) Once repairs are completed, all the rent goes to the landlord. (3) Rent abatement – court figures out what proper rent should be, given violations. E. Meyer’s Argument against Habitability (1975): Warranty of habitability is bad. 1. 2. Profitable repairs a) Tenant might be able to pay higher rent Less-profitable repairs a) Warranty helps initially b) Quantity of this category will decline—it will slip into category 1 or 3. Unprofitable repairs a) Landlord will close, or just not make repairs. b) This is bad—decrease in supply of housing. c) Gov‘t might be forced to take it over. d) Only for awhile—at some point the mangement costs will be too high, even for gov‘t. Fair Housing Act a) Prohibits discrimination on race, national origin, etc. in sale or lease of property b) Exception for sales/leases by owner, in regards to his own residence. Race discrimination: e.g., US v. Starrett City 840 F.2d 1096 (1988) p.658 (mixed-race housing complex; fixed quotas by race – illegal) (1) Rental facility (intended to be co-op), Fed (HUD), state (NYHFA) funding (2) Racially integrated (3) Neighborhood worried about impact of the development (a) Fear of white flight (b) Tipping problem (10-20% minority, accelerating minority population) b) DoJ brings suit, Says quotas violate FHA by making apartments unavailable to blacks solely because of race. c) What’s the purpose of FHA? (1) FHA was enacted with belief that it would result in residential integration. Page 17 of 31 3. F. Rights Against Discrimination/Section 8 1. 2. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu (2) But, at the same time, it was more important to prevent discrimination. (3) Belief that cutting discrimination would promote integration. d) Inherent conflict. (1) In order to ensure integration, SC had to discriminate. (2) Looking at 20 years after FHA, discrimination went down, and segregation went up. e) Ct. Says that congressional record doesn‘t help. (1) Have to look at language of statute. (2) Looks at Wygant, Johnson, Ambach (3) Creates three-part test to allow for quotas: (a) Temporary (b) Group it’s helping has to have faced discrimination in the past. (c) Has to allow access to minority groups. (4) Ct. Says case is based on 14th amendment (a) Uh, isn‘t it an FHA case? (b) Also, Regan DoJ wants to keep 14th amend. limited. (5) J says SC fails test. (6) But, it says that race-conscious plans are ok. (a) Stringent, restrictive test, tho. (7) Otero case was one-time thing, doesn‘t use ―quotas‖ per se. f) Dissent. (1) Says FHA was intended to prevent segregation, and that SC has done exactly that. (2) If Jury applies test, will it find that this is discrimation? (a) It might or might not be temporary (b) Ok, they‘ve been discriminated against in the past. (c) It might actually be better for minorities to live in integrated society . . . (3) Says gov‘t involvement does indeed absolve SC of liability – SC was following NYC housing guidelines. HUD approved federal money. (4) Nuanced response – promoting integration (5) Congress couldn‘t have foreseen a situation where FHA winds up destroying an integrated community. (6) Conclusion – congress hadn‘t foreseen it, so SC should have a chance to make it work; since the statute isn‘t clear, let‘s experiment. (7) Of course, this can mean that only certain developments are integrated . . . Tipping point? Is this reliable/justifiable? a) Historical context – real estate agents that perpetuated tipping; agents would encourage whites to move out (to suburban developments) When should society intervene to regulate private contractual relationships? a) Integration v. non-discrimination b) Does integration of SC result in less housing available to minorities? c) Racism is inherently paternalistic, even when the intention is ―integration‖ d) People should have freedom to organize themselves as they like e) Economic disparities are likely more important than racial ones. Section 8 – vouchers for federal rent funding (1974). a) low income requirement b) can be used anywhere in the city, etc. – no legal requirement that landlord take the voucher. c) if we restrict the use of section 8, is that discriminatory? d) no. it‘s a privilege. e) could be racial ―steering‖ Philadelphia a) Complaints that Philadelphia housing court is stacked in favor of landlords b) E.g., 25% of tenants don‘t even get to show evidence of housing code violations. c) But… possible structural errors with study. New York a) Landlords have difficulty – lots of tenant protections. Page 18 of 31 3. 4. 5. G. Examples of Landlord-tenant court… 1. 2. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu b) Changes: (1) Escrow rule: rent deposits required (so tenants‘ don‘t want to delay anymore) (2) Judges appointed Why the difference? a) In NY, buyers are more savvy, have more power b) In NY, appointed judges; in Phila., elected – landlords can buy support. (1) Particularly in Phila., because to get Dem. Party endorsement, you pay them $50K. c) Phila. Is a ―city of homeowners‖ – 65%. In NY, you can make a lot of money and still rent. d) Also, in NY, it‘s hard to find an apartment—tenants will be more activist and will also get more sympathy. 3. VIII. SERVITUDES, EASEMENTS & NON-POSSESSORY INTERESTS A. Generally – Arguments for and Against 1. Pro: a) Provide for breaking up of property interests b) Ability to Contract right to use, without transferring the rest of your rights. c) Efficient division of property d) Flexible means of controlling land e) Now, includes everything from gas line easements to common-interest communities f) Increase aggregate utility/value by limiting negative uses Con: a) Problematic, tho, because of CHANGED CIRCUMSTANCES b) Exception, discussed but not used in Bolotin: Preserve Efficient Breach. (1) The court will declare deed restrictions to be unenforceable when, (2) By reason of changed circumstances (3) Enforcement of the restrictions (a) Would be inequitable and oppressive, (b) And would harass plaintiff without benefiting the adjoining owners. (4) If the original purpose can be realized, then covenant should be enforced. 2. B. Who should be able to change things? C. Easements 1. Terms/Classification a) Dominant Tenement = benefits b) Servient tenement = burden. c) Affirmative Easement (1) Permits use of another‘s land (2) Ingress/egress (3) Appurtenant – anyone who occupies the land attached to the land (4) In gross – just one guy d) Negative Easement (1) Permit holder of easement to restrict other‘s use. (2) E.g., obstruction of water Creation a) Express grant – Statute of Frauds (all land stuff) b) Express Easements are favored: e.g., Green v. Lupo 32 Wn. App. 318 (1982) xerox (trailer park, easement for road to house, motorcycles on road) a) facts (1) G sells L land via land contract (so G keeps title until full payment) (2) G releases claim to title in exchange for easement (3) G builds trailer park (4) Trailer park residents race motorcycles (5) L blocks road b) Court says (1) T. Ct. says it‘s personal. Page 19 of 31 2. 3. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu (a) What was part of original easement? Easement ―to Greens‖ (not to ―X property‖) (b) Parol evidence – extrinsic evidence is admissible to clarify ambiguous terms (but parol evidence is ambiguous) (2) But it was also granted for utilities, ingress & egress. (3) App. Ct. says it‘s not—clearly Not personal—clearly for ingress & egress, which is for the land. (a) (not to be confused with necessity—this is contracted-for.) (b) Washington has presumption of appurtenant easement – solves all the ambiguity. (c) Ct. does point out that motorcycles are a dangerous nuisance—use has to be reasonable. L can set use restrictions. Easements by Law a) Easement by Implication (1) Two parcels were under single ownership (2) Permanent and continuous use before subdivision (3) Use was apparent (4) Easement is reasonably necessary b) Easement by Necessity: (1) When land is subdivided, and one of the parcels is landlocked from the public road, an easement may be created. (doesn‘t need prior use) (2) Necessity must be created by the subdivision. c) Easement by law: E.g., Reese v. Borghi 216 Cal. App. 2d 324 (1963) p.734 (P owns land, sells off pieces, landlocks himself.) (1) Facts; (a) P sells bunch of land to borghi, landlocks himself (b) D blocks existing path, P sues (2) Court says (a) P gets easement by necessity (b) Not eminent domain – right of way was acquired as a common law right and not by exercise of eminent domain. (c) Not implied reservation (parties didn‘t intend to not have easement) – well recognized distinction between right of way and easement by implication. (no implication here)himself – court creates easement by necessity, ignores implication argument) Easement by prescription – Like adverse possession. a) Court will declare easement under common law. b) Follows requirement of adverse possession: (1) Actual (2) Adverse (3) Open & Notorious, (4) Continuous and Uninterrupted (5) (but doesn‘t have to be exclusive) c) Easement must be Adverse – no permission: Finley v. Botto 161 Cal. App. 2d 614 (1958) p.741 (path between apartment complexes) (1) Facts: (a) Path between houses, used for 10 years. (b) D builds fence across path (c) P sues. (2) T. Ct. says no easement. (a) Use wasn‘t open & notorious, because there was implied permission. (3) Ct. says (a) If neighborly permission, then no adverse, open & notorious use. (b) Of course, this means that you can defeat easement by prescription anytime with the neighborliness argument . . . EXPECT HYPO EASEMENT BY LAW STATUTE ON EXAM. Page 20 of 31 4. 5. 6. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu D. Real Covenants - A contract attached to land. 1. Most commonly used in organized communities a) (Distinguished from contracts by being tied to land, rather than parties) b) Breach  Damages. Common Law a) Benefit & Burden b) Affirmative (e.g., maintain your property) c) Negative (e.g., not growing farm products in residential area) Legal requirements for passing benefit & burden. a) Writing b) Intent c) Vertical Privity: (1) Identical relationship between covenantor and subsequent owners (2) So leaseholders aren‘t necessarily bound by covenants. d) Special requirements for passing the burden: (1) Horizontal Privity (a) Relationship between the original two parties (b) E.g., neighbors don‘t have relationship, but if one party sold the parcel to another, then it works (lessor-lessee works too) (2) Touch & Concern (3) Notice Statute is key here – common law disappearing. Touch & Concern: Eagle Enterprises v. Gross 39 NY2d 505 (1976) p.761 (6-month water utility service doesn‘t adequately touch & concern the land to be a valid covenant) a) Facts (1) EE is successor to original seller, Gross is successor to original purchaser. (2) Original conveyance contains provision for water service (3) Gross builds well, doesn‘t want service any more. (4) EE sues. b) Court says: (1) Should agreement be enforced? (2) T.Ct. finds privity of estate. (3) T.Ct says water service counts. (4) App Ct. reverses, says that agreement doesn‘t sufficiently ―touch and concern‖ the land, since it‘s only seasonal. (5) Of course, if everyone else in the development now has to pay more to get the same water, then relieving Gross of the agreement, (6) Rule: agreement has to ―substantially affect the ownership interest of the landowners‖ Impact of Constitutional Law on Covenants – can‘t violate equal protection clause: Shelley v. Kramer 334 US 1 (1948) xerox (race-based covenant cannot be enforced, because enforcement would violate equal protection clause) a) Facts (1) Agreement saying that no black/asian/etc. families allowed in community (2) Black family buys in. (3) Other owners file suit for state enforcement of agreement (4) T.Ct. says no, App. Ct. Says ok, SCOTUS says no way. b) SCOTUS says: (1) Can this covenant be enforced? (2) No. violated equal protection clause. – relevance of 14th amendment & civil rights. (3) Private parties can enter this covenant, but it‘s unenforceable by law. (changed by civil rights act of 1964.) (4) State action to enforce agreement is a violation. (5) Court could be saying that any contract enforcement is state action . . . does that make easements eminent domain? 2. 3. 4. 5. 6. 8/16/2009 Page 21 of 31 A. Campbell Austin acaustin@law.upenn.edu (6) Court could also be saying that private actions that violate 14th amend. won‘t be enforced. (which is different . . .) (7) Of course, it‘s not really a covenant. (a) Agreement doesn‘t have horizontal privity. (b) 50 years questions intent to tie to the land v. just being a contract. (c) Racial exclusion may or may not touch & concern. E. Equitable Servitudes 1. Generally a) Provides for residents to place obligations on each other b) No privity requirement c) Touch & Concern required d) Notice required e) Intent – there must be intent that the servitude run with the land. Homeowners Associations servitude is ok without privity – Neponsit Property Owners’ Ass’n Inc. v. Emigrant Industrial Savings Bank 278 NY 248 (1938) p.777 ($4 annual fee from property owners to NPOA for streets, sewers, etc) a) Facts (1) Agreement to pay monthly maintenance fee to organization. (2) NPOA – group of property owners, created by original developer. (3) EISB – purchased land at judicial sale (4) Lien gets placed against the land (possibly incl. back fees, too) (5) NPOA sues. b) Court says: (1) Lehman – legal realist . . . substance over form. Who should win? (2) Covenant may or may not run with the land. (3) Document says it does, but there‘s a Test: (a) Touch & Concern (b) Privity of estate (c) Intent (4) T&C: (a) Generally, maintenance charge doesn‘t cut it. (b) However, it‘s much the same thing as maintaining the land directly. (c) But, if it‘s for a public purpose, shouldn‘t that invalidate the covenant? (d) Stretches T&C a bit here. (5) Privity of estate: (a) Original grantor to original grantee, sure. (horizontal) (b) Distinction between current plaintiff (NPOA) and original developer. No horiz. Privity with NPOA. (c) But, Lehman concludes that NPOA is effectively the same as property owners themselves, therefore privity. (i) (of course, property owners don‘t have privity either—only NPDC does) (6) Bottom line—creates an equitable servitude: (a) T&C (b) Intent (c) No privity. c) Historical note— (1) lots of foreclosures; EISB wants to set a precedent saying it doesn‘t have to pay. (2) Also, NPOA wants to preserve services—if banks don‘t pay, then no services. d) Thoughts on Lehman‘s methods . . . (1) Common law tradition – change the law, that‘s ok. (2) However, he‘s not being very honest about it—does lots of flips to get there. (3) Better to just get rid of privity requirement. Changed Conditions don‘t necessarily get you out – Bolotin v. Rindge (Wilshire blvd, servitude says houses only, now a commercial district, servitude stays) a) In this case Page 22 of 31 2. 3. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu (1) No finding that the restrictions had become obsolete (2) Destroy physical conditions that make neighborhood valuable (personhood) (3) In order to get out, (a) Residential development was impossible (b) Covenant no longer benefited the landowners. (4) And . . . they‘ve only got 6 years to go. b) Generally: (1) The court will declare deed restrictions to be unenforceable when, (2) By reason of changed circumstances (3) Enforcement of the restrictions (a) Would be inequitable and oppressive, (b) And would harass plaintiff without benefiting the adjoining owners. (4) If the original purpose can be realized, then covenant should be enforced. c) Thoughts: is this a utilitarian decision? (1) No – personhood (of other owners.): ―effect upon market value . . . is not the test‖ (2) Yes – enforcing contracts generally is utilitarian. IX. COMMON INTEREST COMMUNITIES A. Generally: Subset of Equitable Servitudes (e.g., Neponsit) 1. Benefits: a) Sense of community b) Security c) Shared expenses – amenities d) High standards – no nuisances e) Good for younger families and old people Problems a) Restrictive b) Cultural wasteland! c) Changed conditions . . . tough luck d) Arbitrary and capricious enforcement 3 Documents a) Declaration/Master Deed b) Bylaws – organizing structure c) Deeds to individual units Model Declaration: a) Restrictions on use? ―Single-family community‖ – may violate fair housing act. still, though, the preamble might not be part of the contract. b) Aesthetic standards? Architectural improvements Maintenance Board-set standards – maybe too high. Changes not agreed to by everyone. c) Enforcement Board can just go to the painting. Arbitration d) Recommendation: Board has lots of power . . . better be on the board. e) Voting? one lot, one vote. only owner (not family members, or renters) gets to vote developer might have majority of lots, and might be in financial trouble. Might drastically reduce dues. f) Negotiation? Majority rule – board can amend declaration Page 23 of 31 2. B. Creation & Judicial Oversight 1. 2. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu g) Assessments annual assessments – sure, ok. specific to lot assessments – if the board doesn‘t like you, the board can charge just you. special assessments – board could declare special assessment to build golf course. Concerns With CIC contracts: a) Bill of rights? b) Property itself . . . what does it look like? c) Character of the board? d) Special assessments? e) How much is benefit? ($ amount!) f) Amendments – how easy (too easy?) Contract Model a) Traditional market view – 51% majority rule. b) Personal autonomy as source of obligation c) Internal standard - We want to force people to read & abide by contracts. d) Benefits – (1) Flexible (2) People enter into these agreements (3) Consent granted consciously in exchange for benefit (4) Structure organization however you like. e) Problems – (1) Assumes that CIC members enter will full knowledge (2) Might be restrictive/unconscionable clauses (3) Might not have read it (crappy excuse) (4) Not everyone knows what they want, or wants the same thing. (5) Little power to fight contract modifications. f) K model must be reasonable, but it‘s loose: Hidden Harbor v. Norman 309 So2d 180 (1975) p.842 (no liquor in common space) (1) No liquor adopted by 2-1 vote (2) T.Ct. says this is unreasonable – restriction must have ―reasonable relation to protection of life, property, or the general welfare‖ (3) Court says: (a) Association is not at liberty to adopt arbitrary/capricious rules (b) Conduct doesn‘t have to be a nuisance to be banned. (c) Banning alcohol is reasonable. (d) Administrative framework – within authority & reasonable 3. C. Models 1. 2. Administrative Model a) View CICs as admin bodies with delegated administrative authority (1) Some people are too stupid/lazy/powerless to contract effectively. (2) We want to protect them. (3) Increasing litigation – want to have society play a bigger role (current trend) b) Middle Ground between contract and local gov‘t. c) Courts assess whether association is acting within its authority d) Benefits (1) Assess reasonableness of regulations (2) Some deference to CIC (3) Better protection against abuse. e) Problems (1) Reduces contracting power 8/16/2009 Page 24 of 31 A. Campbell Austin acaustin@law.upenn.edu (2) Judges don‘t really know what they‘re doing – courts impose their own views, rather than just determining reasonableness within CIC framework. (3) Judicial activism, rather than interpretation. f) More litigation & uncertainty – ―reasonableness‖ is pretty vague. g) Admin – reasonableness of reg. is key: Hidden Harbor v. Basso 393 So2d 637 (1981) p.844 (private well in trailer park, reg must be “reasonably related to the fulfillment of desired objectives”) (1) P claims: (a) Increase salinity (b) Stain sidewalk (c) Proliferate wells (2) Court says: (a) Legitimate objectives – go to aesthetics, best interests of all owners. (b) Unreasonable – none of these happened, and it was in use for a year. (c) Standards: (i) Reasonableness applies principally to regulations adopted after formation – to amendments. (administrative framework) (ii) Restriction wasn‘t in place at formation of CIC (if so, then it‘s contract.) Governmental Model a) External standard – really, these are just local gov‘ts. b) Residents should get constitutional protections. c) Benefits (1) Applies civil protections to CICs d) Problems (1) Larger scope of inalienable rights (2) No monopoly on violence, power to distribute wealth, etc. e) Of course, the main reason to have a CIC is because local gov‘t sucks. f) Portola Hills v. James 4 Cal App 4th 289 (1992) p.851 (satellite dish in backyard) (1) T.Ct says – presumption that bylaws are valid, but it‘s unreasonable (a) Sort of administrative. (2) App.Ct. – administrative standard (a) Dish is not visible – exterior structures defined as ―visible to others and/or the public‖ (b) Association can only regulate exterior structures. (c) Therefore, tough luck. (d) Legit goal of association? (i) Satellite dishes are good – worldwide communication – somewhat local gov‘t . . . can‘t restrict constitutional benefits to communication. (ii) Cable does it too, but court disregards this. (3) Might be communal cable; satellite might break this. Court ignores this. (Bylaws?) 3. g) CIC can‘t make ex post facto laws: Winston Towers 200 v. Saverio 360 So2d 470 (Fl. App 1978) p.854 (dog has puppies, retroactive rule invalid.) (1) Facts (a) 1/72: Guy moves in with dog (b) 2/74: Board amends bylaws – no new dogs as of 2/73 (c) 5/75: Dog has puppies (2) Court says: (a) Retroactive regulation (affects back to 1973, when voted on in 1974) (b) Contract – new terms. But not a problem because it‘s new. 8/16/2009 Page 25 of 31 A. Campbell Austin acaustin@law.upenn.edu (c) Not good, because local gov‘t/administrative: ex post facto is unreasonable on its face. (3) Thoughts . . . (a) This sounds somewhat biased . . . CICs can pass new regulations, why not this one? (b) Probably just because this judge likes dogs. Corporate Model (not very useful) a) Corporate board – property owners own shares. b) Decisioning must happen within governing rules. c) Yeah, but CICs are non-profit, etc . . . Trust Model (not very useful either) a) Trustees charged with fiduciary duties to maintain the CIC b) In charge of making sure that CIC operates the way it was supposed to. Restraints on Alienation – Laguna Royale v. Darger (timeshare in geezer condo) a) Associations refusal to consent to transfers was unreasonable and thus not valid. b) Test for reasonableness: (1) Reg has to be rationally related to property protection/preservation/proper operation, as set forth in governing docs. (2) Whether the power was exercised in a fair and nondiscriminatory manner (3) The nature and severity of the consequences of application of the resctriction. 4. 5. 6. X. ZONING A. Euclidean Zoning - Constitutionality 1. Zoning is not a taking: e.g., Village of Euclid v. Ambler Realty 272 US 365 (1926) p.901 (zoning ruled legal by SCOTUS) a) Cleveland Suburb, 5-10K pop., (1) Enacts zoning ordinance: six (seven) use-districts: (a) U1: single-family housing (b) U2: two-family housing (c) U3: apartments, hotels, schools, etc. (d) U4: banks, offices, restaurants, fire/police (e) U5: billboards, warehouses, light industry (f) U6: heavy industry (g) U7: excluded uses (2) Inclusive scheme – U3 can have single- and two-family houses b) Land between RR and highway, (1) Zoned for partial residential (U2), Partial mixed-use (U3), Partial heavy industry (U6) c) P sues for violation of due process for takings. ―nor shall private property be taken for public use, without just compensation‖ (1) Wanted to sell for commercial use and heavy industry. (2) Of course, just because the Gov‘t screwed you, doesn‘t mean you can recover. d) SCOTUS says: (1) Changing times . . . new regulation might be necessary. (generally, tho, it‘s a bad thing.) (2) Scope of Constitutional Guarantees must expand or contract with the times. (3) Relevant past doctrines: (a) Nuisance Law – zoning is just a comprehensive (pre-emptive) scheme. (i) Also, nuisance can only be used by private owners – only in equity. (ii) Maybe a higher bar for nuisance. (iii) Of course, nuisance builds in the specific facts—maybe more fair. (b) Police power – gov‘t can regulate to protect public welfare. (c) Similar to traffic regulations. (d) Gov‘t has to deal with this anyway, might as well do it broadly with zoning. (4) Should be constitutional: (a) Segregation of R/C/I is a good thing. Page 26 of 31 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu (i) Suitable fire apparatus (ii) More favorable environment to rear children (iii) Apartments are parasites (b) Hands-off judicial restraint – legislative judgment must control. (c) Can‘t say zoning is a bad thing. (5) Here‘s the Zoning test: Unless the regulations are “clearly arbitrary and unreasonable”, they’re ok as exercise of police power. Since Euclid – no challenges to zoning idea, just specific application. (still good law) a) E.g., can‘t have unrelated people living together – prevent students Variances allowed occasionally – you can get an exception to the ordinance (Philadelphia— all the time) Houston – no zoning, works ok. a) 97% of towns over 5K have zoning. b) Gas stations next to single-family houses. c) Strong sense of private property . . . d) Generally thought of as not very aesthetically pleasing. e) . . . but, Houston also happens to have lots of CICs. (1) Don‘t want gov‘t telling them what to do f) But they‘re ok with contracting for stuff. Mandelker – free market should take care of everything. a) But, there may be externalities. b) We used to deal with this through nuisance law (more objective) c) Problem: Zoning is subjective – relies on taste and preference. (1) So it‘s not really dealing with externalities. (2) Application is problematic Karkkainen – zoning protects neighborhood personhood interest a) Defending zoning b) Only partially about externalities. c) Point is that zoning protects homeowner‘s consumer surplus. d) Neighborhoods as quasi-commons that is protected by zoning – Zoning protects PERSONHOOD Epstein – zoning stops growth, negative regional consequences a) Zoning allows veto power over future growth (1) Lack of zoning would only small negative consequences for people who live there (2) But zoning has huge negative consequences for people who don‘t. b) NEGATIVE REGIONAL CONSEQUENCES (externalities, of a sort) c) Zoning boards do it wrong—people like having bakeries, etc., mixed in with houses d) Nuisance and servitudes (e.g., Houston) would take care of this—we don‘t need zoning. Ellickson – zoning may or may not be more efficient a) Efficiency – zoning is cheaper than servitudes b) Nuisance is pretty cheap, so it‘d probably work. c) High cost on minorities and poor – zoning favors the wealthy d) Zoning boards are stupid – let people sue when they don‘t like stuff. (1) Suits against factories (2) None against bakeries e) Consensual systems of organization would be better - CICs Fischel – zoning is good, but implementation is bad. a) Attempt to respond to market failures b) Redistributes value from undeveloped landowners to developed landowners c) Not efficient allocation of resources d) Decreases municipal costs – no factories, then no factory problems. (1) Lower tax rates (2) Higher tax revenue per acre (3) Lower requirements for services (a) Fewer people period Page 27 of 31 2. 3. 4. B. Commentary 1. 2. 3. 4. 5. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu (b) Fewer poor people Benefits residents over non-residents Higher property values (this is a good thing) But, zoning can produce problems: Want to make benefits equitable e) f) g) h) 1. 2. C. Takings? Is it right for gov‘t to take property rights? a) Eminent domain instead of zoning (avoid grandfathering) Paradox: Zoning raises value by taking rights away. a) Nuisance & private regulation is hugely expensive (like gov‘t monopoly on currency) b) Not just about poor people. Impact of zoning on free speech (e.g., advertising) Pornography – adult theaters excluded period. SCOTUS says it‘s free speech. a) But courts have upheld zoning. b) E.g., Times Square Right to association – prevent unrelated people living together. a) Courts uphold such prohibitions. b) Tough luck for free association. Equal protection claims – regulation of group homes for mentally disabled, halfway houses, etc. a) Apts ok, ―group homes‖ not. b) But Zoning protected by SCOTUS. Use of zoning ordinances to keep out certain groups Methods: a) Large lot requirements b) Large minimum sq foot requirements c) Prohibitions on apartments or mobile homes d) Expensive materials requirements Benefits: a) Low taxes (1) Few services (2) Private schools, hospitals, etc. b) High property values Problems: a) Externalities elsewhere (poor urban centers) b) Segregation Courts: a) Suits by poor people b) SCOTUS – no fed. constitutional claim against exclusionary zoning (generally, zoning is ok) c) But states can do what they want – zoning is unconstitutional; equal protection under STATE constitutions. d) NJ cases – Mt. Laurel Cases PA Cases: a) ―Fair Share‖ of regional burden test: E.g., Surrick v. Zoning Hearing Board 476 PA 182 (1977) p.984 (limits on total apartment-zoned land ruled unconstitutional) (1) Surrick wants to build apartments at end of commercial strip (which happens to be zoned single-family residential) (2) Problem with zoning – only 1.14% of acreage is zoned commercial/apartments (3) SCOPA says: (a) Willistown says: can‘t just stand in the way of development (4) ―Fair share‖ test: (a) Have to accommodate demands of all the people who want to live there (b) ―Logical area for development‖ 3. 4. 5. 6. D. Exclusionary Zoning 1. 2. 3. 4. 5. 6. 8/16/2009 Page 28 of 31 A. Campbell Austin acaustin@law.upenn.edu (c) Population density fact question (d) Evaluate ―primary purpose‖ of exclusionary intent (5) Court concludes that 1.14% is way too small. b) What should township do? (1) Well, they have to grant a variance (minimum) (2) They can also act pre-emptively, and add another 1-2% area. (3) But township could easily stall— (a) To get standing to sue, you have to buy property in the area. (b) Suits are difficult—high barrier to entry. (c) P has burden of P&P. c) Delay by Zoning Boards: e.g., Fernley v. Schuylkill Twp. 509 PS 413 (1985) p.989 (complete bar to multi-family homes) (1) Philadelphia area (2) Owners of 245 acre farm – Fernley wants to build apartments &c. (3) Schuylkill argues it‘s not in the path of development, so fair share doesn‘t apply. (4) Court says—no. (a) Where a zoning regulation completely excludes a certain type of building, it‘s unconstitutional. (b) Not only that, but you have to grant this specific variance. (c) Want to prevent retaliation. Mt. Laurel NJ – a) Mt. Laurel I: ―Fair share‖ – pretty vague. b) Mt. Laurel II: Supreme Ct. of NJ forces towns to accept ―public housing.‖ (1) Developers could just go in and build. (2) People VERY UPSET. (3) Governor loses by a landslide, after coming out kind of in favor. (4) Legislature responds to courts decision, passes law creating Council on Affordable Housing. Twps required to zone for affordable housing, but they were also allowed to trade permits. (5) E.g., Mt. Laurel sells units to Camden. c) Mt. Laurel III: Affordable housing types sue to invalidate legislation. (1) Chief justice is up for recall in state senate, so he knuckles under, upholds it. Wait, just because something is a bad idea (exclusionary zoning), doesn‘t make it illegal. a) But because local governments are subsidiaries of the states, the state constitution controls. b) So the state interest matters, not the locality. (in other words, the country model is a bad analogy, because of sovereignty differences) c) So the state can override zoning regulations if they violate state interests. 7. 8. E. Growth Controls XI. TAKINGS A. Generally 1. 2. 3. If the gov‘t takes private property for public use, it has to pay. Physical invasion by 3rd party – de facto taking Harm test: a) If regulation is to prevent harm/nuisance/etc, it‘s usually ok. b) If regulation is to create a public benefit, then it‘s a taking. Economic loss test: a) Onwer must be left with some reasonable economic value (e.g., Lucas v. Carolina Coastal.) Just Compensation: a) Market value (includes future expectations) b) Partial taking . . . severance damages (1) Change in value (2) Nothing. 4. 5. B. Exactions 8/16/2009 Page 29 of 31 A. Campbell Austin acaustin@law.upenn.edu 1. Generally: a) Requirement that Developer build sewers, parks, schools, etc. in addition to housing. b) Impact Fees – developer has to pay $1K per person to build schools, etc. 3 Reasons: a) Shift all development costs (externalities included) to the developer b) Encourage efficiency by forcing developer to consider all costs c) Enable growth – development may outstrip gov‘t ability to expand services d) Discourage growth by making development more expensive e) Redistribute wealth from developer to current residents Linkages – developer has to build low-income housing in addition to whatever they want to build. Restrictions on Exactions: a) There must be a connection between justification and the regulation: Nolan v. California Coastal Comm’n (public easement as criteria for building permit . . . unconstitutional, but not a taking) (1) Exchange? (2) Yeah . . . but it‘s still a loss of a ―stick in the bundle‖ (3) Test: There must be an ―essential nexus‖ between regulation and the interest. (4) Bad test—if it‘s a taking, it‘s a taking. (a) ―Essential nexus‖ doesn‘t mean anything relating to takings. (b) It does relate to gov‘t regulation of land & exercise of the police power. b) Dolan v. City of Tigard (required donation is unconstitutional . . . but not a taking) (1) Dolan owns hardware store on creek, wants to double size, add parking. (2) New test on regulation in addition to ―essential nexus‖: ―rough proportionality‖ (3) Govt‘ has burden of persuasion (burden on city in exactions, burden on property owner in zoning cases, when everyone has same problem) Implementation: a) Same Reg (1) Small Harm: it‘s ok. (2) Big Harm: it‘s not. b) So ―essential nexus‖/ ―rough proportionality‖ don‘t actually mean anything . . . (1) Maybe it‘s more like ―I know a taking when I see it‖ Penn Central v. City of NY (historical comm‘n denies building over grand central; court upholds it – no taking.) a) SCOTUS says: Factors Balancing test: (1) Economic impact (2) Impact on investment-backed expectations (3) Character of Gov‘t action (4) Physical invasion b) State police power is ok to: (1) Promote health, safety, morals, etc. (2) But if it is not ―reasonably necessary to the effectuation of a substantial public purpose‖, then the regulation may be a taking. c) Takings doesn‘t break single parcels into sub-parts. d) So, this isn‘t a taking . . . (1) Doesn‘t interfere with current uses. (2) Doesn‘t prohibit ANY construction, just hast to be within set standards (3) Transferrable rights mitigate the harm. (4) Doesn‘t impact the return expected initially (although, PC went bankrupt shortly) (5) Zoning (and landmark designations) can increase the value of land . . . Sax – Property Under Assault. Exclusive v. Non-Exclusive value a) Understandings of Property have changed – b) Letting people develop property however they want isn‘t bringing social benefit anymore. (1) Lower non-exclusive profit margin of progress (2) Scarcity of undeveloped land drives value Page 30 of 31 2. 3. 4. 5. C. Regulations on Use 1. 2. 8/16/2009 A. Campbell Austin acaustin@law.upenn.edu But . . . non-exclusive beneficiaries aren‘t going to organize to protect Grand Central. (1) Diffuseness. (2) Smallness of individual interest (3) Imperfect knowledge (4) Differential values (5) Difficulty of Pricing d) So non-exclusive benefits are difficult to protect . . . so Gov‘t does it. (1) But now we‘re forcing individuals to continue conferring a benefit. (2) (plus, Bad incentive – encourage mediocrity). e) But this is EXPENSIVE! - Public solution (as in Lucas) – so we force public to pay for the restriction. (1) Tax abatements (2) Density bonuses (3) Transferrable development rights Lucas v. South Carolina Coastal Council 505 US 1003 (1992) p.354 (complete destruction of economic value is a taking) a) Guy has waterfront property – two lots b) Coastal Council says he can‘t build—have to protect the dunes. c) Two types of takings: (1) Physical Invasion (2) Complete destruction of economic value. d) ―where the state deprives all economic use, the state must pay compensation, unless the state can show that the proscribed use interests were not part of the title to begin with.‖ e) Implied limitation in takings clause. (1) Presumption against the gov‘t. (2) In order for regulation to be ok, you have to find that there was a nuisance. (3) Nuisance should cut it: (if another landowner could say ―you can‘t do this‖, then the gov‘t can say it too.) c) 3. Index Adverse................................................... 4, 10, 20 Breach................................................... 13, 19, 21 burden ......................................................... 19, 21 Burden ............................ 8, 11, 12, 21, 28, 29, 30 Changed Circumstances ............................. 19, 23 Changed Conditions ......................................... 22 Color of title .......................................................4 Ellickson ................................................. 3, 10, 27 Epstein .............................................................. 27 Fischel .............................................................. 27 Good Faith ........................................................ 10 Karkkainen ....................................................... 27 Lobsters ..............................................................3 Mandelker ......................................................... 27 mistake ...............................................................4 Nuisance ........................... 2, 9, 16, 24, 26, 27, 28 Surprise............................................................. 10 Unclean hands .................................................. 10 8/16/2009 Page 31 of 31